Applying blockchain technology to the freight forwarding industry has been in development for some time now. The core function of the blockchain -- a digital ledger made up of linked, secure records that is resistant to unauthorized changes -- is tailor-made to address the complexities of the shipping industry.
Since one piece of freight can pass through multiple hands, across many borders, and can be intermodal, the chances of documentation issues and fraudulent activity, and the delays that come with both, are high. Blockchain technology can not only help security in a freight transaction, but also increase transparency while optimizing each handoff in the supply chain.
Most of the recent activity in blockchain for freight forwarding has focused on optimization and transparency. As a result, in the past year, logistics blockchain ecosystems have begun to pop up. If you’re unfamiliar, a logistics blockchain ecosystem is an end-to-end monitoring and documentation portal supported by blockchain technology. A single ecosystem is developed by one source and hosts multiple partners who make up one freight transaction across the entire supply chain.
So far, these sources have been logistics mainstays. Carriers, in particular, have taken the lead on developing these new platforms.
Early last year Maersk, in a partnership with IBM, unveiled TradeLens, a freight tracking platform supported by blockchain technology that they say “promotes a more efficient, predictable and secure exchange of information in order to foster greater collaboration and trust across the global supply chain.”
In March 2018, carrier APL announced a successful test of a blockchain solution with Accenture that counted logistics giant Keuhne + Nagel and a European customs organization as partners.
Then, In November, carriers CMA CGM, OOCL, Evergreen Logistics (all three of which belong to the carrier alliance, Ocean Alliance), and Yang Ming, announced a partnership with Oracle Cloud Blockchain Services to develop their own blockchain-based freight management platform.
These groups say their blockchain solutions are neutral. But surprisingly, most announced partners have been ports and terminal operators, with some of the highest-volume ports aligning with one blockchain solution over the other. For example, the Shanghai International Port Group, which operates all the public terminals at the world’s busiest container port, is committing to the Ocean Alliance-Oracle initiative exclusively.
With these blockchain initiatives adding partners across different links of the global supply chain, freight forwarders need to know: are these platforms interchangeable? Or do freight forwarders have to decide which ecosystem they want to be a part of?
Freight Forwarders: Will Loyalty Matter?
It makes sense that carriers would be at the forefront of blockchain technology in logistics. Carriers are the indispensable link in ocean freight: freight moves in their containers, on their ships. Ports have an incentive to side with the carrier-developed platform that brings them the most value. And NVOCC’s will become users based on the carrier contracts they hold.
But what about freight forwarders?
It’s obvious why ports and NVO’s would have carrier loyalty, but forwarders do as well. At CoLoadX, for example, one of our earliest adjustments to our marketplace was publishing the carrier for the rates freight forwarders could find. The feedback we got was clear: forwarders wanted to know which carrier was transporting their cargo because positive or negative experiences with a given carrier impacted who they would sail with in the future.
Unfortunately, it’s not as simple as choosing the blockchain initiative that your favorite carrier is using. These blockchain initiatives are being built as end-to-end supply chain solutions. Picking a carrier also means picking a partnering port, and perhaps even partnering manufacturers, intermodal delivery options, and more.
Let’s look at ports as an example: so far, no port has agreed to participate in more than one blockchain ecosystem.
The three most prominent ecosystems show signs of port specialization that can lead to regional specialization. Maersk admitted that they’ve had trouble finding east-west traction, though they’ve picked up pilot partnerships in Spain and the Middle East. APL’s ecosystem started testing with a major European customs organization, signaling that the Singapore-based carrier may focus on European trade early on. Meanwhile, the Ocean Alliance and Yang Ming blockchain ecosystem boasts the most diverse set of ports, counting Shanghai, Dubai, and Hutchinson Ports, which operates ports in every continent but Antartica, as partners.
Where your business sails will play a major role in which blockchain solution you use the most.
Our Advice: Sit Tight, but Start Preparing
Carrier loyalty is great, but the truth for freight forwarders is that you’ll probably end up using the ecosystem that best meets your customer’s demands on a case-by-case basis. Where you’re shipping to will matter more than who you are shipping with. There’s a very real scenario where you’ll have to get comfortable with all of the blockchain initiatives as they develop. It’s likely that, as these ecosystems grow, you’ll need keys to each portal for your company to grow.
We’re still extremely early in the blockchain for logistics cycle, but one thing is clear: even with concerns about scalability, blockchain-based logistics solutions are on their way. The potential benefits to the supply chain -- increased security, increased speed, increased transparency -- are just too great to ignore.
If the future of blockchain in freight forwarding will be dictated by the carriers, freight forwarders should start exploring the burgeoning options now.
Find the right rate for your ocean freight today with CoLoadX.